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Analyst Reduces Price Target on DreamWorks Ani to $18

NEW YORK - BTIG analyst Richard Greenfield on Tuesday further reduced his 2011 financial estimates for DreamWorks Animation and cut his price tag on its stock by $2 to $18, citing the box office performance of Kung Fu Panda 2, among other things.

He said that recent film performance could also reduce DWA's leverage in striking a new film distribution deal on better terms when its current one with Viacom's Paramount expires next year.

"We also believe investor hopes of a DWA acquisition by a larger media industry peer are fading as the key reason to buy DWA would be for its franchises, but with Shrek finished and Panda fading, why would someone buy DWA for nearly $2 billion now?" Greenfield wrote.

At the end of May, he had already cut back his 2011 and 2012 earnings estimates for DWA due to weaker domestic box office for the Kung Fu Panda sequel, a lower tie ratio between box office and DVD sales for all upcoming movies and lower profits from DWA’s TV and live entertainment businesses.

And after recently raising his international box office assumptions for the film, he said: "With the vast majority of markets open, we believe our estimates were too aggressive and that the split will be negatively biased by a box office skew to China (we expect over 15% of foreign box will be from China) where film rentals are only mid-teens versus 45 percent-plus in other non-U.S. markets." With the film's attendance underperforming in top DVD markets, Greenfield said his DVD expectations are likely also too high.

The always outspoken Greenfield, who rates DWA shares a "sell," argued that "virtually all aspects of the DWA investment thesis [are] eroding. " DWA shares were little changed at $21.48 as of 11:40am ET.